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sole traders and partnerships - Coggle Diagram
sole traders and partnerships
sole traders
A sole trader is a person that owns and runs the business
characteristics
one person makes all the desicions
one person keeps all the profit
one person provides all the money ( capital)
advantages and disadvantages
disadvantages
suffer all loses
business ends when the owner dies
Unlimited liability( If your business fails you could lose all your personal wealth
the business may stop if the owner is ill
advantages
keep all the profits
make all the desicions
easy to set up (no legal documents)
personal contact with customers
Owner of a business is personally responsible for all business debts
If your business fails you could lose all your own personal wealth
If you don't pay your debts you could become bankrupt
partnership
When a business is run by 2 to 20 people
characteristics
owners agree to share responsability for running a business
Owners agree to share profits
2 or more people agree to jointly make a business
advantages and disadvantages
advantages
easy to raise capital
finantial information not published
decision makeing is shared
partners can specialise in different areas
easy to set up
disadvantages
partners may disagree and fall out
Any partners' decisions are binded to all
profit has to be shared
partnerships still tend to be small
partners have unlimited liablility
deed of partnership
A deed of Partnership sets out the role and input of each partner, and in most partnership business, this will vary between partners
a deed of partnership sets matters as:
-the amount of capital contributed by each partner to the partnership
-how much say each partner has in business decisions
-how profits are shared out among the partners
-what should be done if a partner wishes to leave the partnership or a new partner joining
how to settle any disputes among partners
Many partnership have sleeping partners. These are business partners who put money into the partnership, but do not pay an active role in the running of the business
risks of partnerships
In a partnership the partners have unlimited liability. under the PARTNERSHIP ACT 1890, partners are equally responsible for each other’s actions and all debts of the business
If one partner runs up a big debt, the other partners can be asked to pay for it.
entrepeneur
people who set up business (owners)
withou them the private sector wouldn't exsist
they are innovators, they try to make businnes ideas and try to spot gaps in the market
they need to make decisions
uncorporated and incorporated businesses
incorporated
business has a different legal identity from the owner
uncorporated
no legal difference between the business and the owner
